NEW YORK -- Wall Street hit the brakes on its big rally Wednesday after disappointing profit reports from companies and warnings that the market has moved too far, too fast.
The S&P 500 slumped 1.5% for its worst loss since beginning a monster-sized rally just before Halloween. The Dow Jones Industrial Average dropped 475 points, or 1.3%, from its record high, while the Nasdaq composite sank 1.5%
Shares of FedEx tumbled 12.1% for one of the market's biggest losses after reporting weaker revenue and profit for the latest quarter than analysts expected. It also now expects its revenue for its full fiscal year to fall from year-earlier levels, rather than being roughly flat, because of pressures on demand.
The package delivery company pumps commerce around the world, and its signal for potentially weaker demand could dim the hope that's fueled Wall Street's recent rally: that the Federal Reserve can pull off a perfect landing for the economy by slowing it enough to stifle high inflation but not so much that it causes a recession.
Winnebago Industries also fell short of analysts' profit expectations for the latest quarter. The maker of motorhomes and other recreational products said it sold fewer units than a year earlier because of "market conditions" and had to offer higher discounts. Its stock dropped 5.6%.
General Mills, which sells Progresso soup and Yoplait yogurt, reported stronger profit for the latest quarter than expected, but its revenue fell short as a recovery in its sales volume was slower than expected. The company said a key sales measure may now fall for its full fiscal year because of "a more cautious consumer economic outlook" and other factors. Its stock fell 3.6%.
Still, a pair of reports showed the U.S. economy may be in stronger overall shape than expected. Both confidence among consumers in December and sales of previously owned homes in November improved more than economists had expected.
Encouraging signs that inflation is cooling globally also continue to pile up. In the United Kingdom, inflation in November unexpectedly slowed to 3.9% from October's 4.6% rate, reaching its lowest level since 2021.
Treasury yields have been tumbling since late October and they fell again following the U.K. inflation report.
The yield on the 10-year Treasury dropped to 3.85% from 3.93% late Tuesday. It had been above 5% in October, at its highest level since 2007 and putting harsh downward pressure on the stock market.
"The market pendulum has swung from extreme pessimism less than two months ago to extreme optimism," said Mark Hackett, chief of investment research at Nationwide.
The strength and length of the recent rally raised criticism that stocks have simply rallied too much, with several strategists on Wall Street forecasting at least a pause in the short term.
It's still not certain whether the Fed can pull off what was seen as a nearly impossible tightrope walk for the economy. And critics say the number of cuts to rates that Wall Street is forecasting for 2024 seems unlikely unless the economy falls into a recession, which would hurt corporate profits and thus stock prices.
Some officials from the Federal Reserve have also made recent comments saying it's too early to consider a cut to rates in March, which is when traders largely expect them to begin, according to data from CME Group.
Wednesday's losses in the stock market were widespread, and roughly 95% of companies within the S&P 500 dropped. All told, the S&P 500 fell 70.02 points to 4,698.35. The Dow dropped 475.92 to 37,082.00, and the Nasdaq sank 225.28 to 14,777.94.
Information for this article was contributed by Matt Ott and Alex Veiga of The Associated Press.
A person walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Dec. 20, 2023, in Tokyo. Wall Street ticked higher Wednesday amid hopes that moves by Japan's central bank to keep interest rates easy for investors could be a preview for the rest of the world.(AP Photo/Eugene Hoshiko)
A person walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Wednesday, Dec. 20, 2023, in Tokyo. Wall Street ticked higher Wednesday amid hopes that moves by Japan's central bank to keep interest rates easy for investors could be a preview for the rest of the world.(AP Photo/Eugene Hoshiko)